Risk Warning: Your Capital is at Risk.
In this trading guide, we explore the ways to trade orange juice, along with regulated brokers in where you can start trading the commodity. Read on to find out what experts think about orange juice as a commodity on the global market.
In a hurry? If you want to get started trading agricultural commodities like orange juice, here are brokers available in to consider:
Disclaimer: Availability subject to regulations.
Between 74-89% of retail investor accounts lose money when trading CFDs.
Contents
Reasons You May Trade Orange Juice
Investors might want to consider the following reasons for speculating in orange juice:
- Bet on Global Warming
- Bet on Emerging Market Demand
- Inflation Hedge
Important: This is not investment advice. We present a number of common arguments for and against investing in this commodity. Please seek professional advice before making investment decisions.
Bet on Global Warming
Unusual weather patterns have had such a devastating effect on orange crops in the recent past.
Many scientists attribute increased hurricane activity in Florida to global warming. Similarly, some blame drought conditions in Brazil on a rise in temperatures.
These weather conditions have produced supply shocks for orange juice in the past and may do so again in the future.
Bet on Emerging Market Demand
Emerging market countries such as China and Russia have not consumed orange juice for as long as Western countries have.
These countries have been surprising bright spots in an otherwise bleak picture for orange juice demand.
As emerging market countries grow their economies, their demand for orange juice may increase. Buying orange juice futures may be a way to participate in that demand.
Orange Juice As An Inflation Hedge
Investing in orange juice is a way to hedge against the loss of purchasing power from inflation.
Low-interest rates from the Federal Reserve and other central banks have produced speculative bubbles in many asset classes.
Although food remains the most basic and fundamental necessity, agricultural commodities have yet to experience significant price hikes.
However, inflation has the potential to change that. Since orange juice has essential nutrients including vitamin C and potassium, it could be a food commodity that garners huge demand.
Where Can You Trade Orange Juice?
If you are looking to start trading FCOJ and other agricultural commodities, here’s a list of regulated brokers available in to consider.
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. Between 74%-89% of retail investor accounts lose money when trading CFDs. You should consider whether you can afford to take the high risk of losing your money.
Ways To Trade Orange Juice
Traders have a few choices in ways to trade orange juice.
Orange Juice Futures Explained
The Intercontinental Exchange (ICE) offers a contract on FCOJ that settles into 15,000 pounds of orange juice solids.
The contract has expiration months of January, March, May, July, September, and November.
Futures are a derivative instrument through which traders make leveraged bets on commodity prices. If prices decline, traders must deposit additional margin in order to maintain their positions.
At expiration, the contracts are physically settled with delivery.
Orange Juice Options On Futures
The ICE also offers an options contract on FCOJ. Options are also a derivative instrument that employs leverage to invest in commodities.
As with futures, options have an expiration date. However, options also have a strike price, which is the price above which the option finishes in the money.
Options buyers pay a price known as a premium to purchase contracts. To learn more about how options trading works, see our Options Trading Guide.
An options bet succeeds only if the price of FCOJ futures rises above the strike price by an amount greater than the premium paid for the contract.
Therefore, options traders must be right about the size and timing of the move in FCOJ futures to profit from their trades.
Buying Orange Juice ETFs
These financial instruments trade as shares on exchanges in the same way that stocks do.
There is no ETF that specifically invests in orange juice. However, the Elements Rogers International Commodity Agriculture Total Return ETN trades in a very broad basket of commodities.
Orange juice represents less than 2% of the holdings in this fund.
Can I Buy Orange Juice Company Shares?
It is impossible to get pure-play exposure to orange juice prices through the equity market.
Most orange groves are privately owned.
How Do Orange Juice CFDs Work?
A popular way to invest in orange juice is through the use of a contract for difference (CFD) derivative instrument.
CFDs allow investors to speculate on the price of FCOJ. The value of a CFD is the difference between the price of FCOJ at the time of purchase and its current price.
Some regulated brokers worldwide offer CFDs on FCOJ. Customers deposit funds with the broker, which serve as a margin.
The advantage of CFDs is that traders can have exposure to FCOJ prices without having to purchase an asset. Find out how CFD contracts work in this CFD Trading Guide.
IMPORTANT: CFDs are not available in the USA due to local regulation, and regulated brokers do not accept US citizens or US residents as clients.
Should I Trade Orange Juice?
Orange juice prices tend to be extremely volatile. For the most part, industry players that want to hedge risk utilize orange juice futures.
However, investors that want to speculate on orange juice prices might consider doing so as part of a diversified basket of commodities.
Investing in a basket of commodities that includes orange juice, other agricultural commodities, metals, and energy can accomplish two goals:
- Protection against inflation
- Protection against the volatility of individual commodities
Important: This is not investment advice. We present a number of common arguments for and against investing in this commodity. Please seek professional advice before making investment decisions.
What Is The Demand Outlook For Orange Juice?
Although the demand picture for orange juice has been weak in the United States and Western European countries, there is still likely ample demand for orange juice prices to stabilize.
The supply picture, on the other hand, continues to look great for investors.
The leading producing countries – Brazil and the United States – face ongoing and seemingly insurmountable production problems due to weather and disease.
The Risks Of Trading Orange Juice
Traders should, however, consider these three risks of investing in orange juice:
- Growing concerns about obesity and diabetes have put all items with sugar in the crosshairs of health advocates. Orange juice has high levels of natural sugars.
- Efforts to eradicate tree diseases may be successful. This could lead to bumper orange crops.
- Global warming may be over-hyped or not the cause of stronger hurricanes. If calmer weather patterns return to Florida, then maybe the citrus industry can rebuild.
Expert Opinions On Orange Juice Trading
Experts generally have an optimistic outlook about orange juice prices due to severe supply shortages.
One expert cites record low Florida orange production:
“It could be pretty bad — the lowest since around 1946. About 70 percent of what they were projecting is lost across the board.”
Gene McAvoy, Agriculture Expert, University of Florida
Another analyst agrees and notes that the market is on edge. Jack Scoville, vice president for Price Futures Group in Chicago, cites very low production estimates from the Florida Citrus Mutual, a trade organization, as reasons for optimism about prices:
“If the crop is anywhere near that small, even with the lousy [orange juice] demand outlook and things like that, we’ll have a chance to push the market up around $2 [a pound].“
Jack Scoville, Vice President, Price Futures Group (Chicago)
Further Reading
If orange juice seems like a commodity you want to trade, see these in-depth guides on various ways to trade the commodity:
- A guide to CFD trading
- How options work and where you can trade them
Traders interested in options contracts on agricultural commodities like orange juice can find a list of options strategies and other technical analysis tool guides on Commodity.com.
Alternatively, you can compare orange juice as a commodity to other popular agricultural commodities on the market like oats, wheat, sugar, and coffee.
